Berkeley bonuses anger investors

SHAREHOLDERS in housebuilder Berkeley feel they are being 'bribed' to vote through a controversial £100m bonus plan for four of the company's top executives.

A shareholder vote next month to approve the return of £1.4bn of cash to investors - worth £12 per share - will be conditional on them backing a proposed incentive scheme that could be worth more than £50m to founder and chief executive Tony Pidgley.

The scale of the potential rewards has raised eyebrows in the City, which is concerned it is being railroaded into agreeing to the pay proposals.

Pidgley promised to return company cash to investors at the end of June, when he also said the upmarket builder would refocus on more affordable housing.

One investor in the company said: 'They originally tried to put the change of focus and cash return, and the remuneration, in one resolution. They have now agreed to separate them but they are still inter-dependent.

'First, we will vote on the focus change and cash return, and then on the pay policy with a proviso that, if it is not approved, the previous resolution will be cancelled. At the moment it looks like they are bribing shareholders to vote on pay in return for the £12-a-share offer.'

Supported by the prospect of the cash return, Berkeley shares are currently trading at 1147p.

The Association of British Insurers, representing institutional investors, is said to have seen Berkeley's draft pay plan but has yet to make its position clear.

As it stands, the scheme would see Berkeley's executives secure a 15% stake in the business, with Pidgley in line for just over half the incentive allocation when it crystallises in six years.

The value of the scheme to the executives assumes the firm will be worth £700m in 2010, but some shareholders say that could be downplaying its potential value.

'The illustrations they have used show what the remainder company would look like if it was worth £100m to £500m. The suspicion is there is relatively little information and we are being led to look at values. On long-term multiples, the firm could be worth £1 billion,' another investor said.

Several backers said they would prefer to see the incentive scheme modified to a 'sliding scale' of share awards depending on the rump value of the business in six years.

They say this system would keep directors incentivised - a point contested by Berkeley - while preventing unreasonable windfalls.

Rob Perrins, 39, the firm's finance director and Pidgley's likely successor, is another executive in the planned pay scheme. Perrins and director Tony Carey could bag about £20m each while another board member, Greg Fry, could pick up £10m.

Approval for the scheme requires a straight majority, while the change of company strategy requires a higher 75% threshold.